By Rama Siva in India

Micro-financing lets the poor gain access to financial services in a form which suits them. The size of the loans and deposits are relatively small, the service is provided at the doorstep and very often the customers attend financial literacy classes in self-help groups before signing up. How important is technology for this business model?

In my work at Mann Deshi Women’s Co-operative Bank in the city of Mhaswad in western India , I found the use of an interesting innovation called the ‘Simputer’. (See figure below). It is a device that field loan agents use to record their transactions and provide an account balance receipt to the customer. This is a completely home grown innovation. The device is designed and manufactured by a company in a neighboring town and is relatively cheap and rugged.

The head office of the bank similarly uses technology for maintaining accounts and customer records. But at the customer’s end, technology does not seem to have penetrated much yet. All customers still use a passbook to maintain updates and deposit cash directly in the hands of the agent. ATM or internet banking is nowhere to be seen because of the remoteness of many villages.

Mobile phone banking has a good chance of changing all this. Almost all customers I spoke to possess a mobile phone and have basic familiarity with SMS. Pass books and printed receipts could be replaced by cell phones and SMS based updates. In India, this transformation is currently waiting for financial regulators to catch up.